Should Microsoft and Meta Share More Wealth and Pay Investors Larger Dividends?

The Magnificent Seven tech stocks ran out of steam in a big way going into 2025, thanks in part to Trump’s Liberation Day tariffs, which fueled an unprecedented rise in macro uncertainty and, with that, off-the-charts volatility in both directions. Though a big correction year for the big tech titans isn’t out of the ordinary after two straight years of outsized gains, this latest sell-off certainly feels different than those of the past.

Whether it’s due to Trump’s ability to crater the market or set the stage for a short-term relief rally, it can be tough to evaluate firms without knowing which tariffs will stick, rise, or be chopped in half in a few quarters from now. Heck, it’s difficult to tell what will happen tomorrow, as Trump either hits the pedal on tariffs or lifts his foot off of it slightly. In the face of such uncertainty, it can be tempting to wait things out and forego the bargains in the stock markets that pass us by.

While the circus of tariffs goes on, the artificial intelligence (AI) boom is still moving right along. And as we enter quarterly earnings season for a few of the big names, perhaps we’ll see more than just Trump tariff news that will move markets.

Could AI firms really spark the next leg higher without comforting words from Trump on de-escalating tariffs?

Time will tell. Either way, the Magnificent Seven will have the opportunity to make AI the topic of the day again. Of course, conference calls are sure to be mostly about the response to tariffs and their potential impact going into year’s end. As stocks experience increasing headline fatigue, AI efforts might help lift the broad basket of struggling tech stocks, especially since investors are now less willing to buy as prices fall.

Even if AI headlines manage to top the tariff ones come earnings season, investors will probably be more focused on returns on investment than ever before as the threat of a tariff-driven bear market looms. Indeed, a recession isn’t a guarantee at this point, especially if a timely de-escalation is soon to follow this nasty tariff standoff with China.

Either way, investors will probably want to be compensated for riding out the painful decline in the Mag Seven names. Perhaps a slight pullback in AI spending and a commitment to return more to shareholders could be in the cards as investors continue throwing in the towel on the former market darlings.

Microsoft and Meta: Is there room for generous dividend hikes as AI spending surges?

Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) are heavy AI spenders poised to invest $80 billion and $60-65 billion on AI for 2025. Given the lead in the AI race is on the line, such heavy spending may be justified to keep up, even in light of DeepSeek, which showed the world the tremendous capability that’s possible with relatively limited resources.

Though I’m sure many investors would react positively if either firm were to trim their budgets slightly while raising their dividends (MSFT yields 0.91% while META yields 0.42%), I think buying back stock could prove the wiser idea, as the recent wave of tariff-induced selling pressure mounts. 

Perhaps a combination of dividend hikes and buybacks could incentivize shareholders to ride out the tariff hurricane going into year’s end. In any case, I think investors should put their faith in management as they look to continue full speed ahead on AI. At the end of the day, AI is fueling a growth engine that not even tariffs may be able to topple. And if hefty spending means keeping that engine humming, perhaps other levers can be pulled to deliver generous dividend hikes.

The bottom line

Even without a jumbo-sized dividend hike, the gravitational pull on their share prices may be able to draw in longer-term investors seeking to get paid a bit more to wait for the next leg of the AI-induced market run. Perhaps we’ll get a second chance to pick up shares of MSFT with a yield north of 1% again.

In the meantime, we’re in the midst of the biggest AI correction since ChatGPT fueled one of the most heated tech runs in recent memory. And while there’s no telling when the selling will end, the Mag Seven juggernauts have plenty of options to explore as their shares ride out the tariff tumble.

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